Market Watch — Prices Increase, Sales Decrease
Fewer distress sales affect overall home-sale numbers, as price normalization sets in
CV Median Price per Square Foot
The median price per square foot for the Coachella Valley rose another 4 percent to $135 in January — a three-month increase of 14 percent. Market Watch projects a year-end price of $150, assuming sales pick up in the next few months.
Even as prices increased, the three-month average of home sales declined in January compared to last year. Home sales averaged only 684 units in January compared to 775 units last year. We generally attribute 12 percent difference to the overall decline in distressed sales. This means the decline is primarily due to fewer investor purchases than homeowner purchases.
Sales by City
The picture of the overall sales decline becomes clearer by looking at each city. We see large declines in Coachella and Desert Hot Springs and significant declines in Indio and Cathedral City. These cities have the highest levels of distressed sales. Sales in Palm Springs, Palm Desert, and La Quinta remained firm. This supports the view that the overall decline is due primarily to fewer distressed sales.
Palm Springs and Palm Desert
The median price per square foot in the different cities, shown in the table, can vary broadly month to month, even though we minimize that by using three-month averages. This means that monthly changes can be somewhat suspect. However, we believe the change from Dec. 31, 2012, to Jan. 31, 2013, have particular meaning: The price pattern of Palm Springs and Palm Desert might be changing. Notice that Palm Desert rose 4.5 percent while Palm Springs declined 3.8 percent.
For three years, Palm Springs has led all the other cities, including Palm Desert, in the housing recovery. Three years ago, both cities had about the same median price per square foot ($150). Three years later, Palm Springs is at $206, while Palm Desert at $156. This pattern has to change soon, and it may have started. Homebuyers coming to the Coachella Valley should begin to notice the widening price difference between comparable homes in different cities and lean more toward the lower-priced area. This phenomenon is called “price normalization.”
We will continue to monitor price changes in the various cities to see if homeowners shift their focus away from the recently popular areas toward those that have been lagging.
Vic Cooper and Mike McDonald are partners in Market Watch LLC, a nationally recognized real estate advisory company that produces The Desert Housing Report. Visit www.marketwatchllc.com